Part 0.5. Implementation of Article XIII A of the California Constitution

Chapter 2. Change in Ownership and Purchase

Section 62

(a) (1) Any transfer between coowners that results in a change in the method of holding title to the real property transferred without changing the proportional interests of the coowners in that real property, such as a partition of a tenancy in common.

(2) Any transfer between an individual or individuals and a legal entity or between legal entities, such as a cotenancy to a partnership, a partnership to a corporation, or a trust to a cotenancy, that results solely in a change in the method of holding title to the real property and in which proportional ownership interests of the transferors and transferees, whether represented by stock, partnership interest, or otherwise, in each and every piece of real property transferred, remain the same after the transfer. The provisions of this paragraph shall not apply to transfers also excluded from change in ownership under the provisions of subdivision (b) of Section 64.

(b) Any transfer for the purpose of perfecting title to the property.

(c) (1) The creation, assignment, termination, or reconveyance of a security interest; or (2) the substitution of a trustee under a security instrument.

(d) Any transfer by the trustor, or by the trustor's spouse or registered domestic partner, or by both, into a trust for so long as (1) the transferor is the present beneficiary of the trust, or (2) the trust is revocable; or any transfer by a trustee of such a trust described in either clause (1) or (2) back to the trustor; or, any creation or termination of a trust in which the trustor retains the reversion and in which the interest of others does not exceed 12 years duration.

(e) Any transfer by an instrument whose terms reserve to the transferor an estate for years or an estate for life. However, the termination of such an estate for years or estate for life shall constitute a change in ownership, except as provided in subdivision (d) and in Section 63.

(f) The creation or transfer of a joint tenancy interest if the transferor, after the creation or transfer, is one of the joint tenants as provided in subdivision (b) of Section 65.

(g) Any transfer of a lessor's interest in taxable real property subject to a lease with a remaining term (including renewal options) of 35 years or more. For the purpose of this subdivision, for 1979–80 and each year thereafter, it shall be conclusively presumed that all homes eligible for the homeowners' exemption, other than manufactured homes located on rented or leased land and subject to taxation pursuant to Part 13 (commencing with Section 5800) and floating homes subject to taxation pursuant to Section 229, that are on leased land have a renewal option of at least 35 years on the lease of that land, whether or not in fact that renewal option exists in any contract or agreement.

(h) Any purchase, redemption, or other transfer of the shares or units of participation of a group trust, pooled fund, common trust fund, or other collective investment fund established by a financial institution.

(i) Any transfer of stock or membership certificate in a housing cooperative that was financed under one mortgage, provided that mortgage was insured under Section 213, 221(d)(3), 221(d)(4), or 236 of the National Housing Act, as amended, or that housing cooperative was financed or assisted pursuant to Section 514, 515, or 516 of the Housing Act of 1949 or Section 202 of the Housing Act of 1959, or the housing cooperative was financed by a direct loan from the California Housing Finance Agency, and provided that the regulatory and occupancy agreements were approved by the governmental lender or insurer, and provided that the transfer is to the housing cooperative or to a person or family qualifying for purchase by reason of limited income. Any subsequent transfer from the housing cooperative to a person or family not eligible for state or federal assistance in reduction of monthly carrying charges or interest reduction assistance by reason of the income level of that person or family shall constitute a change of ownership.

(j) Any transfer during the period March 1, 1975, to March 1, 1981, between coowners in any property that was held by them as coowners for all or part of that period, and which was eligible for a homeowner's exemption during the period of the coownership, notwithstanding any other provision of this chapter. Any transferee whose interest was revalued in contravention of the provisions of this subdivision shall obtain a reversal of that revaluation with respect to the 1980–81 assessment year and thereafter, upon application to the county assessor of the county in which the property is located filed on or before March 26, 1982. No refunds shall be made under this subdivision for any assessment year prior to the 1980–81 fiscal year.

(k) Any transfer of property or an interest therein between a corporation sole, a religious corporation, a public benefit corporation, and a holding corporation as defined in Section 23701h holding title for the benefit of any of these corporations, or any combination thereof (including any transfer from one entity to the same type of entity), provided that both the transferee and transferor are regulated by laws, rules, regulations, or canons of the same religious denomination.

(l) Any transfer, that would otherwise be a transfer subject to reappraisal under this chapter, between or among the same parties for the purpose of correcting or reforming a deed to express the true intentions of the parties, provided that the original relationship between the grantor and grantee is not changed.

(m) Any intrafamily transfer of an eligible dwelling unit from a parent or parents or legal guardian or guardians to a minor child or children or between or among minor siblings as a result of a court order or judicial decree due to the death of the parent or parents. As used in this subdivision, "eligible dwelling unit" means the dwelling unit that was the principal place of residence of the minor child or children prior to the transfer and remains the principal place of residence of the minor child or children after the transfer.

(n) Any transfer of an eligible dwelling unit, whether by will, devise, or inheritance, from a parent or parents to a child or children, or from a guardian or guardians to a ward or wards, if the child, children, ward, or wards have been disabled, as provided in subdivision (e) of Section 12304 of the Welfare and Institutions Code, for at least five years preceding the transfer and if the child, children, ward, or wards have adjusted gross income that, when combined with the adjusted gross income of a spouse or spouses, parent or parents, and child or children, does not exceed twenty thousand dollars ($20,000) in the year in which the transfer occurs. As used in this subdivision, "child" or "ward" includes a minor or an adult. As used in this subdivision, "eligible dwelling unit" means the dwelling unit that was the principal place of residence of the child or children, or ward or wards for at least five years preceding the transfer and remains the principal place of residence of the child or children, or ward or wards after the transfer. Any transferee whose property was reassessed in contravention of the provisions of this subdivision for the 1984–85 assessment year shall obtain a reversal of that reassessment upon application to the county assessor of the county in which the property is located. Application by the transferee shall be made to the assessor no later than 30 days after the later of either the transferee's receipt of notice of reassessment pursuant to Section 75.31 or the end of the 1984–85 fiscal year.

(o) Any transfer of a possessory interest in tax-exempt real property subject to a sublease with a remaining term, including renewal options, that exceeds half the length of the remaining term of the leasehold, including renewal options.

(p) (1) Commencing on January 1, 2000, any transfer between registered domestic partners, as defined in Section 297 of the Family Code, including, but not limited to:

(A) Transfers to a trustee for the beneficial use of a registered domestic partner, or the surviving registered domestic partner of a deceased transferor, or by a trustee of such a trust to the registered domestic partner of the trustor.

(B) Transfers that take effect upon the death of a registered domestic partner.

(C) Transfers to a registered domestic partner or former registered domestic partner in connection with a property settlement agreement or decree of dissolution of a registered domestic partnership or legal separation.

(D) The creation, transfer, or termination, solely between registered domestic partners, of any coowner's interest.

(E) The distribution of a legal entity's property to a registered domestic partner or former registered domestic partner in exchange for the interest of the registered domestic partner in the legal entity in connection with a property settlement agreement or a decree of dissolution of a registered domestic partnership or legal separation.

(2) Any transferee whose property was reassessed in contravention of the provisions of this subdivision for a transfer occurring between January 1, 2000, and January 1, 2006, shall obtain a reversal of that reassessment upon application to the county assessor of the county in which the property is located. Application by the transferee shall be made to the assessor no later than June 30, 2009. A county may charge a fee for its costs related to the application and reassessment reversal in an amount that does not exceed the actual costs incurred. This paragraph shall be liberally construed to provide the benefits of this subdivision and Article XIII A of the California Constitution to registered domestic partners.

(A) After consultation with the California Assessors' Association, the State Board of Equalization shall prescribe the form for claiming the reassessment reversal described in paragraph (2). The claim form shall be entitled "Claim for Reassessment Reversal for Registered Domestic Partners." The claim shall state on its face that a "certificate of registered domestic partnership" is available upon request from the California Secretary of State.

(B) The information on the claim shall include a description of the property, the parties to the transfer of interest in the property, the date of the transfer of interest in the property, and a statement that the transferee registered domestic partner and the transferor registered domestic partner were, on the date of transfer, in a registered domestic partnership as defined in Section 297 of the Family Code.

(C) The claimant shall declare that the information provided on the form is true, correct, and complete to the best of his or her knowledge and belief.

(D) The claimant shall provide with the completed claim the "Certificate of Registered Domestic Partnership," or photocopy thereof, naming the transferee and transferor as registered domestic partners and reflecting the creation of the registered domestic partnership on a date prior to, or concurrent with, the date of the transfer for which a reassessment reversal is requested.

(E) Any reassessment reversal granted pursuant to a claim shall apply commencing with the lien date of the assessment year, as defined in Section 118, in which the claim is filed. No refunds shall be made under this paragraph for any prior assessment year.

(F) Under any reassessment reversal granted pursuant to that claim, the adjusted full cash value of the subject real property in the assessment year described in subparagraph (E) shall be the adjusted base year value of the subject real property in the assessment year in which the excluded purchase or transfer took place, factored to the assessment year described in subparagraph (E) for both of the following:

(i) Inflation as annually determined in accordance with paragraph (1) of subdivision (a) of Section 51.

(ii) Any subsequent new construction occurring with respect to the subject real property.

History.—Stats. 1979, Ch. 1161, in effect September 29, 1979, added the second sentence to subdivision (g); and substituted "mortgage" for "housing cooperative" after "such", added "202" after "Section", added "or such housing cooperative was financed or assisted pursuant to Section 514, 515, or 516 of the Housing Act of 1949 or Section 202 of the Housing Act of 1959, or the housing cooperative" after "amended", and substituted the balance of the first sentence after "Agency" for "and the Regulatory and Occupancy Agreements were approved by the respective insuring agency or the lender, the California Housing Finance Agency", and added the second sentence to subdivision (i). Stats. 1980, Ch. 285, in effect June 30, 1980, operative July 1, 1980, added ", other than mobilehomes located on rented or leased land and subject to taxation pursuant to Part 13 (commencing with Section 5800)," to subdivision (g). Stats. 1980, Ch. 1081, in effect September 26, 1980, added "as provided in subdivision (b) of Section 65" to the end of subdivision (f). Stats. 1980, Ch. 1349, in effect January 1, 1981, added the balance of the sentence after "tenancy in common" in subdivision (a) and added subdivision (j). Stats. 1981, Ch. 615, in effect September 22, 1981, added subdivision (k). Stats. 1981, Ch. 1141, in effect October 2, 1981, operative January 1, 1982, added "by the trustor, or by the trustor's spouse, or by both" after the first "transfer" in subdivision (d); added "during the period March 1, 1975 to March 1, 1981" after "transfer", substituted "that" for "the" before second "period", deleted "between March 1, 1975, and March 1, 1980" after second "period", added "entire" before third "period", and added "notwithstanding any other provision of this chapter" after "coownership" in the first sentence, added "provided it is" after "located" and substituted "March 26, 1982" for "February 28, 1981" after "before" in the second sentence, and added the third sentence of subdivision (j); and deleted "and a holding corporation as defined in Section 23701h holding title for the benefit of any of the aforementioned corporations," after "public benefit corporation" in subdivision (k). Stats. 1982, Ch. 1465, in effect January 1, 1983, added "(1)" after "(a)", "transferred" after "property", and "in that real property" after "coowners", and deleted "or any transfer of title" after "common" in new subdivision (a)(1); added "(2) Any transfer" before the first "between," "or individuals" after "individual", and "or" after "a corporation,", deleted "or an individual to a legal entity" after the second "cotenancy,", added "to the real property" after "title" and "ownership" after "proportional", substituted "of" for "by" after "interests", and added "in each . . . transferred" after "otherwise" in the first sentence, and added the second sentence to new subdivision (a)(2); added "and" after the second "land", and substituted "that" for "such" before the third "land" and after "fact" in the second sentence of subdivision (g); substituted "that" for "such" after the first "provided" and after "amended, or" in the first sentence, and after "level of" in the second sentence of subdivision (i); deleted "and" after "corporation,", and added "and a . . . corporations" before "or any" in subdivision (k); and added subdivision "(l)" and "(m)". Stats. 1984, Ch. 1010, in effect January 1, 1985, added subdivision (n). Stats. 1985, Ch. 186, effective January 1, 1986, deleted "of Section 62" after "subdivision (d)" in subdivision (e). Stats. 1996, Chap. 1087, in effect January 1, 1997, substituted "that" for "which" throughout text; substituted "life. However" for "life; however" after "estate for" in subdivision (e); substituted "land have" for "land and have" in subdivision (g); substituted "these corporations" for "the aforementioned corporations" after "any of" in subdivision (k); and added subdivision (o). Stats. 2002, Ch. 775 (SB 2092), in effect January 1, 2003, substituted "manufactured homes" for "mobilehomes" after "other than" in the second sentence of subdivision (g), and deleted "such" after "transfer from one" in the first sentence of subdivision (k). Stats. 2005, Ch. 416 (SB 565), in effect September 29, 2005, added subdivision (p). Stats. 2006, Ch. 364 (AB 3076), in effect January 1, 2007, added "and floating homes subject to taxation pursuant to Section 229" after "(commencing with Section 5800)" in the second sentence of subdivision (g). Stats. 2007, Ch. 555 (SB 559), in effect October 12, 2007, added "or registered domestic partner" after "the trustor's spouse" in the first sentence of subdivision (d); numbered the former first sentence of the first paragraph of subdivision (p) as paragraph (1) and substituted "on January 1, 2000," for "with the lien date for the 2006–07 fiscal year" after "Commencing" therein, designated former paragraphs (1), (2), (3), (4), and (5) as subparagraphs (A), (B), (C), (D) and (E), respectively, and added paragraph (2) thereto.

Note.—Section 22 of Stats. 1980, Ch. 285, provided no payment by state to local governments because of this act.

Note.—Section 5 of Stats. 1980, Ch. 1349, provided the amendments made to Section 62 shall be effective for the 1981–82 assessment year and years thereafter. It is the intent of the Legislature that the provisions of this act shall apply to the determination of base year values for the 1981–82 fiscal year, and shall apply to any change in ownership occurring on or after March 1, 1975. No escape assessments shall be levied and no refund shall be made for any years prior to 1981–82 for any increases or decreases in value made for the 1981–82 fiscal year or fiscal years thereafter as the result of the enactment of this act.

Note.—Section 3 of Stats. 1981, Ch. 615, provided the amendments made to Section 62 of the Revenue and Taxation Code by this act shall be effective for the 1981–82 assessment year and years thereafter. It is the intent of the Legislature that the provisions of this act shall apply to the determination of base year values for the 1981–82 fiscal year, and shall apply to any change in ownership occurring on or after March 1, 1975. No escape assessments shall be levied and no refund shall be made for any years prior to 1981–82 for any increases or decreases in value made for the 1981–82 fiscal year or fiscal years thereafter as the result of the enactment of this act.

Note.—Section 14 of Stats. 1981, Ch. 1141, provided the provisions of this act shall take immediate effect and shall apply to any change in ownership occurring on or after March 1, 1975. However, all changes in value shall be made effective commencing with the 1982–83 fiscal year. No escape assessments shall be levied and no refund shall be made for any years prior to the 1982–83 fiscal year for any increases or decreases in value made for the 1982–83 fiscal year or fiscal years thereafter as the result of the enactment of this act.

Section 16 thereof provided the Controller shall report to the Legislature on the amount of claims made by county auditors under Section 16113 of the Government Code for compensation for property tax revenues lost by reason of the classification or exemption of property by this act.

Note.—Section 2 of Stats. 1984, Ch. 1010, provided the provisions of this act shall be effective for the 1984–85 fiscal year and fiscal years thereafter. It is the intent of the Legislature that the provisions of this act shall apply to the determination of base year values for the 1984–85 fiscal year, and shall apply to any change in ownership occurring on or after March 1, 1975. No escape assessments shall be levied and no refunds shall be made for any fiscal year prior to the 1984–85 fiscal year for any increases or decreases in value made for the 1984–85 fiscal year or fiscal years thereafter as the result of the enactment of this act.

Note.—Section 1 of Stats. 2005, Ch. 416 (SB 565), provided that the Legislature finds and declares all of the following:

(a) It is the intent of the Legislature in enacting this act to guarantee equality for all Californians, regardless of gender or sexual orientation, and to further the state's interests in protecting Californians from the potentially severe economic and social consequences of abandonment, separation, the death of a partner, and other life crises.

(b) To this end, the Legislature has enacted various statutes in an attempt to move California closer to fulfilling the promises of inalienable rights, liberty, and equality contained in Sections 1 and 7 of Article I of the California Constitution.

(c) For example, in 2002, the Legislature enacted Chapter 447 of the Statutes of 2002, effective July 1, 2003, which granted registered domestic partners the same intestate succession rights with respect to separate property as spouses. A liberal reading of Chapter 447 was intended by the Legislature and this act builds upon that framework.

(d) Many lesbian, gay, and bisexual Californians continue to face economic discrimination, despite forming lasting, committed, and caring relationships with persons of the same sex according to the laws of this state. These couples build lives together, as do spouses, by purchasing property and creating and operating family businesses. Expanding the rights of registered domestic partners with respect to property ownership would further California's interests in promoting family relationships and protecting family members during life crises, and would reduce discrimination on the bases of sex and sexual orientation in a manner consistent with the California Constitution.

Note.—Section 1 of Stats. 2007, Ch. 555 (SB 559) provided that the Legislature finds and declares all of the following:

(a) It is the intent of the Legislature in enacting this act to guarantee equality for all Californians, regardless of gender or sexual orientation, and to further the state's interests in protecting Californians from the potentially severe economic consequences of abandonment, separation, the death of a partner, and other life crises.

(b) To this end, the Legislature has enacted various statutes in an attempt to move California closer to fulfilling the promises of inalienable rights, liberty, and equality contained in Sections 1 and 7 of Article I of the California Constitution.

(c) For example, in 1999, the Legislature enacted Chapter 588 of the Statutes of 1999, effective January 1, 2000, which established a state registry of domestic partnerships. In 2002, the Legislature enacted Chapter 447 of the Statutes of 2002, effective July 1, 2003, which granted registered domestic partners the same intestate succession rights with respect to separate property as spouses. In 2003, the Legislature enacted Chapter 421 of the Statutes of 2003, effective January 1, 2005, which extended to registered domestic partners nearly all of the rights and responsibilities of spouses under state law that had not been provided by prior domestic partner legislation. And, in 2005, the Legislature enacted Chapter 416 of the Statutes of 2005, which amended Section 62 of the Revenue and Taxation Code concerning valuation and taxation of real property, to exclude property transfers between registered domestic partners from the definition of "change in ownership" for purposes of property tax reassessment. The Legislature has intended a liberal reading of these laws and this act builds upon this existing framework.

(d) Although it intended to protect family members during life crises and to reduce discrimination on the bases of sex and sexual orientation in a manner consistent with the California Constitution, Chapter 417 of the Statutes of 2005 did not expressly exempt transfers from one registered domestic partner to the other registered domestic partner that resulted from the death of a partner prior to January 1, 2006.

(e) Protection against reassessment of family owned real property and resulting increases in property taxes can be a critical bulwark against financial hardship and the loss of the family home or business when a family member dies or a family relationship ends in divorce or dissolution of a domestic partnership. The same is true for domestic partners whose relationships predated California's protective legislation. Many domestic partners whose property was reassessed due to the death of one partner or the dissolution of the domestic partnership have been forced by the resulting increase in property taxes to sell the family home. Those domestic partners who have retained ownership and have been paying increased property taxes are being treated unequally in a manner inconsistent with the goal of the domestic partnership laws.

(f) Many lesbian, gay, and bisexual Californians continue to face economic discrimination, despite forming lasting, committed, and caring relationships with persons of the same sex according to the laws of this state. These couples build lives together, as do spouses, by purchasing property and creating and operating family businesses. Expanding the rights of domestic partners with respect to property ownership would further California's compelling interests in promoting family relationships and protecting family members during life crises, and would reduce discrimination on the bases of sex and sexual orientation in a manner warranted by the California Constitution.

(g) Therefore, the Legislature finds and declares that this act serves a public purpose of the state.

Section 3 thereof provided that no reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.

Section 4 thereof provided that notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.

Construction.—The construction of Section 60 and Section 62 are governed by two precepts: the drafters intended Section 62 to provide "examples" of common applications of Section 60 rather than exceptions to it, and application of Section 62 must be consistent with Section 60. Thus, neither subdivision (g) nor subdivision (e) was intended to apply to a sale of a freehold interest in real property and a simultaneous leaseback from the purchaser to the seller. Pacific Southwest Realty Co. v. Los Angeles County, 1 Cal.4th 155. The sale and leaseback of a building for a term of 50 years did not come within the exclusion of Section 62(e) applicable to any transfer of an interest whose term is reserved to the transferor an estate for years. The leaseback met the three-prong definition of change in ownership in Section 60. Also, Property Tax Rule No. 462(d)(2) provided that the creation of estate for years for a term of 35 years or more of real property is a change in ownership at the time of transfer unless the instrument creating the estate for years reserves such estate in the transferor, and there was no reservation of a lease in the transaction. Industrial Indemnity Co. v. City and County of San Francisco, 218 Cal.App.3d 999. Distribution of parcels of real property in 1982 to shareholders pursuant to an agreement after dissolution of a corporation did not come within the exclusion of Section 62(a), as it existed in 1982, applicable to transfers of proportional interests. Prior to the distribution, the shareholders had equity interests in each parcel, while after the transfers groups of shareholders owned fee interests in various different parcels. Although the shareholders' proportional interests remained the same after distribution, with respect to title, the proportional interests of each shareholder in each parcel changed. Kern v. Imperial County, 226 Cal.App.3d 391.

The sale of an office complex subject to three recently executed 50-year leases assigned to its wholly owned subsidiary did not come within the exclusion of Section 62(e), since that section is intended to include only reservations in which the transferor retains the beneficial use of the property. Here, the seller did not retain a beneficial use of the property since its subsidiary paid rent to the purchaser, which enjoyed the entire beneficial interest in the property. Neither did it come within the exclusion of Section 62(g), since there was no established lease in effect at the time of sale, the transfers of the fee to the purchaser and the tenancy to the subsidiary being essentially simultaneous. This exclusion protects a lessee that has made improvements and is required to pay property taxes but has no control over the lessor's sale to a third party, which was not the situation in this case. Crow Winthrop Operating Partnership v. Orange County, 10 Cal.App.4th 1848. Majority partner's purchase of minority partners' partnership interests and partnership transfer of its real property to the sole partner is not covered by subdivision (a)(2) of this section. Any variation in the proportionality of a conveyance by a legal entity to its members results in 100 percent reassessment. Zapara v. Orange County, 26 Cal.App.4th 464.

Life estate.—A transfer of real property with a retained life estate is not a change in ownership. The life tenant has the primary interest under the value equivalency test, and there is no transfer of the present interest in the property until the life tenant dies and the property vests in the remainder. Leckie v. Orange County, 65 Cal.App.4th 334.

Leasehold interest.—Pursuant to subdivision (c) of Section 61, because the ground lease at issue was for only 20 years, the subsequent transfer of the underlying land included a change in ownership and reassessment of the improvements even though the lessee, and not the ground lessor, had constructed and owned the improvements under the terms of the lease. Additionally, all three parts of the Section 60 test must be applied to a change in ownership analysis of a real property transfer. Auerbach v. County of Los Angeles Assessment Appeals Board No. 1, 39 Cal.4th 153.

Constitutionality.—The Legislature has the constitutional authority to exempt or exclude various transfers from the definition of change in ownership even if those transfers would otherwise fit the definition of change in ownership. Strong v. State Board of Equalization, 155 Cal.App.4th 1182.

Registered Domestic Partners.—The exclusion for registered domestic partners is not palpably arbitrary and is supported by a rational basis; and, as a result, constitutes a valid exercise of the Legislature's constitutional authority to create new exclusions from the definition of change in ownership. Strong v. State Board of Equalization, 155 Cal.App.4th 1182.

Joint Tenancy.—When a sole owner of real property created a joint tenancy with his brother, no change in ownership occurred under Revenue and Taxation Code Section 65, subdivision (b). However, subsequent to the creation of the joint tenancy, when one of the joint tenants terminated the joint tenancy by transferring his joint tenancy interest to himself as a tenant in common, a 50 percent change in ownership occurred. Benson v. Marin County Assessment Appeals Board (2013) 219 Cal.App.4th 1445.